Bank of the Year, Bolivia: Banco Nacional de Bolivia

Nov 1, 2013

Bolivian lawmakers have ushered in changes that have hurt banks’ profitability. More pain is in store

Bolivia’s banking system has been transformed by
its government over the past few years. That’s
both good news and bad. Good in that opportunities are still
plentiful if the economy continues to grow. But profits have
suffered: the country’s largest
banks’ return on equity (ROE) has fallen from
around 20%, to 11%, between 2006 and 2011.

Agents for change have come in two forms. The first was a
new tax system that came into force at the end of 2011. The
second is a new set of financial services laws, approved in
August, which were set to come into effect in November. And
then there are market forces.

"The competition is tougher than it used to be," says
Fernando Albano, an analyst at Moody’s. "This hit
profitability in the whole system."

In 2011, the government increased a tax on profits for the
highest-earning banks, from 25%...